The editor’s opinion from Marketplace, Northeast Wisconsin’s business magazine. (Obligatory disclaimer: Most hyperlinks go to outside sites, and we’re not responsible for their content. And like fresh watermelon, peaches, pineapple, grapefruit, tomatoes and sweet corn, hyperlinks can go bad after a while.)
June 3, 2008
Hold your applause
In fact, in 2006 (the most recent year for which final state-to-state comparisons are available), the birthplace of the income tax ranked 11th in state and local taxes as a percentage of personal income, 12.3 percent, and 17th in state and local taxes per capita, $4,025.
Good news, right? Uh, no, seeing as how Wisconsin’s state and local taxes per capita increased 4 percent from 2005. In fact, since 1994, when I started at Marketplace, Wisconsin’s state and local taxes per capita have increased by almost 50 percent. The reason Wisconsin’s ranking dropped is because, on average, state and local taxes per capita among the 50 states have increased 55 percent in those dozen years. (Even so, the national average is still lower than Wisconsin, although Wisconsin has gone from having state taxes per capita 17 percent higher than the national average to 8.5 percent more than the national average.)
(In 2006, Wyoming was number one in taxes as a percentage of personal income, 16.6 percent, and New York was number one in taxes per capita, $6,420. Alabama was at the bottom in state and local taxes per capita — $2,813 in 2006 — every year between 1994 and 2006.)
As state Rep. John Nygren (R–Marinette) points out, “Our improved ranking had more to do with decisions made during previous sessions such as revenue caps and a state commitment to two thirds school funding, the 2000 tax cuts, coupled with other states increasing taxes. … Don’t let anyone paint this as anything other than a small step towards reducing the tax burden on both families and business.”
Is it even that? The fact that Wisconsin’s taxes increased by less than other states’ taxes is something worth celebrating with one clap from one hand. The aforementioned $652 million deficit was solved, remember, largely through one tax increase, fund transfers, and pushing spending forward into the next budget cycle. The fact that, as Nygren pointed out, the 2000 tax cuts and the revenue caps weren't undone doesn't mean that Wisconsin's taxes do not remain too high.
Of course, things could be worse: The Wall Street Journal last week chronicled the economic woes of our neighbors to the north and east, Michigan. Despite raising income tax rates 11.5 percent (from 3.9 percent to 4.35 percent), and despite raising their gross business receipts tax 22 percent, state officials expect a budget shortfall of $350 million to $550 million. (That's compared with Wisconsin's projected $652 million budget deficit, by the way.) The $1.3 billion in revenue those tax hikes were supposed to bring in turns out to have been one-third too optimistic.
Michigan has been in a recession for 18 months, with 6.9 percent unemployment, higher than the national average and higher than Wisconsin’s unemployment rate. The state is fourth in home value decreases, and twice as many people are moving out of Michigan as are moving into Michigan. While Michigan's problems have much to do with national economic issues, it is just crazy to believe that an 11-percent tax increase will make anything better.
Unfortunately, as Michigan Taxpayers Alliance chair Leon Drolet points out, "Are tax payers as well organized as tax spenders ? No way. Taxspenders have unions, rallies, lobbyists, government relations departments, and public funds to advocate for higher spending. ... Lansing knows tax payers are disorganized and easy to divide and conquer. ... It is so much easier for Lansing to raise taxes ... than it is to reduce spending and have to face the wrath of the well-organized taxspender groups that have well-funded Political Action Committees."
Unfortunately, "Lansing" can be replaced with "Madison" in the last paragraph without anyone noticing the difference.
(Irrelevant trivia: Ever wondered why the Upper Peninsula belongs to Michigan and not Wisconsin? According to a new book, How the States Got Their Shapes, the U.P. belongs to Michigan because, in drawing the boundaries between Michigan and Indiana and Ohio, the line was drawn north of the southernmost point of Lake Michigan, which meant that Gary ended up in Indiana and Toledo ended up in Ohio, so for consolation, Congress gave Michigan the U.P. Certainly the U.P. got the raw end of that deal.)